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Credit Constraints and Growth in a Global Economy

Author

Listed:
  • Nicolas Coeurdacier

    (Département d'économie)

  • Stéphane Guibaud

    (Département d'économie)

  • Keyu Jin

    (London School of Economics and Political Science (LSE))

Abstract

We show that in an open-economy OLG model, the interaction between growth differentials and household credit constraints—more severe in fast-growing countries—can explain three prominent global trends: a divergence in private saving rates between advanced and emerging economies, large net capital outflows from the latter, and a sustained decline in the world interest rate. Micro-level evidence on the evolution of age-saving profiles in the US and China corroborates our mechanism. Quantitatively, our model explains about a third of the divergence in aggregate saving rates, and a significant portion of the variations in age-saving profiles across countries and over time.

Suggested Citation

  • Nicolas Coeurdacier & Stéphane Guibaud & Keyu Jin, 2015. "Credit Constraints and Growth in a Global Economy," Sciences Po publications info:hdl:2441/169d87l3e88, Sciences Po.
  • Handle: RePEc:spo:wpmain:info:hdl:2441/169d87l3e88rpoi5e1tgckfi6a
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Frédéric Gannon & Gilles Le Garrec & Vincent Touze, 2016. "Aging, international capital flows and long run convergence," Sciences Po publications 2016-09, Sciences Po.
    2. repec:tcb:cebare:v:18:y:2018:i:1:p:1-11 is not listed on IDEAS
    3. Alberto Martin & Jaume Ventura, 2017. "The macroeconomics of rational bubbles: a user's guide," Economics Working Papers 1581, Department of Economics and Business, Universitat Pompeu Fabra.
    4. M. Marx & B. Mojon & F. Velde, 2017. "Why Have Interest Rates Fallen far Below the Return on Capital," Working papers 630, Banque de France.
    5. Karl Farmer & Irina Ban, 2017. "Modeling Financial Integration, Intra-EMU and Asian-US External Imbalances," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 23(3), pages 261-281, August.
    6. Andersen, Torben M. & Bhattacharya, Joydeep, 2016. "Why mandate young borrowers to contribute to their retirement accounts?," ISU General Staff Papers 201609260700001016, Iowa State University, Department of Economics.
    7. Mika Nieminen, 2017. "Patterns of international capital flows and their implications for developing countries," WIDER Working Paper Series 171, World Institute for Development Economic Research (UNU-WIDER).
    8. İmrohoroğlu, Ayşe & Zhao, Kai, 2018. "The chinese saving rate: Long-term care risks, family insurance, and demographics," Journal of Monetary Economics, Elsevier, vol. 96(C), pages 33-52.
    9. repec:pal:imfecr:v:65:y:2017:i:3:d:10.1057_s41308-017-0036-2 is not listed on IDEAS
    10. Damien Cubizol, 2017. "Transition and capital misallocation: the Chinese case," Working Papers halshs-01176919, HAL.
    11. Gauti B. Eggertsson & Neil R. Mehrotra & Sanjay R. Singh & Lawrence H. Summers, 2016. "A Contagious Malady? Open Economy Dimensions of Secular Stagnation," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(4), pages 581-634, November.
    12. Josef Schroth, 2016. "Capital Flows to Developing Countries: Is There an Allocation Puzzle?," Staff Working Papers 16-53, Bank of Canada.
    13. Ayşe İmrohoroğlu & Kai Zhao, 2018. "Household Saving, Financial Constraints, and the Current Account in China," Working papers 2018-15, University of Connecticut, Department of Economics.
    14. Charles Bean, 2016. "Living with Low for Long," Economic Journal, Royal Economic Society, vol. 0(592), pages 507-522, May.
    15. Karl Farmer & Bogdan Mihaiescu, 2016. "Credit constraints and differential growth in equilibrium modeling of EMU and global trade imbalances," Graz Economics Papers 2016-05, University of Graz, Department of Economics.
    16. Karl Farmer & Bogdan Mihaiescu, 2015. "Pension systems and financial constraints in a three-country OLG model of intra-EMU and global trade imbalances," Graz Economics Papers 2015-08, University of Graz, Department of Economics.
    17. repec:eee:ecolet:v:163:y:2018:i:c:p:27-31 is not listed on IDEAS
    18. Flavia Corneli, 2017. "Medium and long term implications of financial integration without financial development," Temi di discussione (Economic working papers) 1120, Bank of Italy, Economic Research and International Relations Area.
    19. Gilles Le Garrec & Vincent Touzé, 2016. "Capital accumulation and the dynamic of secular stagnation," Documents de Travail de l'OFCE 2016-17, Observatoire Francais des Conjonctures Economiques (OFCE).
    20. Damien Cubizol, 2017. "Rebalancing in China: a taxation approach," Working Papers 1732, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    21. Karl Farmer, 2016. "The Intertemporal Equilibrium Modeling of Intra-EMU and Global Trade Imbalances," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 22(4), pages 377-395, November.
    22. repec:eee:jimfin:v:81:y:2018:i:c:p:88-115 is not listed on IDEAS
    23. Sumru Altug & Melih Can Firat, 2018. "Borrowing constraints and saving in Turkey," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 18(1), pages 1-11.
    24. Muendler, Marc-Andreas, 2017. "Trade, technology, and prosperity: An account of evidence from a labor-market perspective," WTO Staff Working Papers ERSD-2017-15, World Trade Organization (WTO), Economic Research and Statistics Division.

    More about this item

    Keywords

    Global Economu; Economical Growth; Credit Constraints;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • P24 - Economic Systems - - Socialist Systems and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation

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